Xiaomi fends off US blacklisting for now

15 Mar 2021

Image: © mehaniq41/Stock.adobe.com

The Chinese smartphone company has taken legal action against the US Department of Defense to prevent being placed on a blacklist.

Xiaomi is enjoying a momentary reprieve in the US after a judge temporarily blocked the government’s efforts to blacklist the Chinese tech firm.

In January, the US Department of Defense moved heavily against the smartphone maker, blacklisting it over alleged ties to China’s military.

The allegations, which Xiaomi denied, would force US investors to divest from the company and would seriously curtail the company’s ability to do business in the US. The Trump administration placed Xiaomi and eight other companies on the list.

In retaliation, Xiaomi launched legal proceedings against the US government, calling the ban “unlawful” and saying the company was given no opportunity to defend itself.

On Friday (12 March), a judge temporarily blocked the actions of the US Department of Defense before they took effect. The judge said that the “defendants have not made the case that the national security interests at stake here are compelling” and that there was “plainly a lack of substantial evidence” linking Xiaomi to the Chinese military.

This is only a temporary situation and Xiaomi will be seeking a permanent block on any blacklisting.

“Xiaomi plans to continue to request that the court declare the designation unlawful and to permanently remove the designation,” a company spokesperson said.

Since the ruling, Xiaomi’s shares have seen a bump of more than 10pc. The Hong Kong-listed firm is currently trading at a market cap of around $613bn.

It is a significant move for Xiaomi in the early days of the Biden administration, which is expected to take a more tactful approach to China than Trump did.

Many of the Trump-era strategies against Chinese tech companies have faltered and dithered. ByteDance, the owner of TikTok, is no longer under order to sell the US portion of the social media platform and courts have also blocked Trump’s efforts to ban WeChat, the popular messaging app.

However, tensions remain between the US and Huawei over the former’s blocks on the company and allegations of cyberespionage and risks to 5G security – allegations that Huawei denies.

Jonathan Keane is a freelance business and technology journalist based in Dublin